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Environmental quality, public debt and economic development

Abstract : This article analyzes the consequences on capital accumulation and environmental quality of environmental policies financed by public debt. A public sector of pollution abatement is financed by a tax and/or public debt. We show that if the initial capital stock is high enough, the economy monotonically converges to a long-run steady state. On the contrary, when the initial capital stock is low, the economy is relegated to an environmental-poverty trap. We also explore the implications of public policies on the trap and on the long-run stable steady state. In particular, we find that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long-run steady state.
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Submitted on : Friday, January 14, 2011 - 5:50:44 AM
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Mouez Fodha, Thomas Seegmuller. Environmental quality, public debt and economic development. Environmental and Resource Economics, Springer, 2014, 57, pp.487-504. ⟨10.1007/s10640-013-9639-x⟩. ⟨halshs-00555625⟩

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